IP RIGHTS SITUATION IN CHINA AND SOME BEST PRACTICES TO CONQUER THE CHINESE MARKET
China has long been seen as the “world’s factory,” producing low-quality manufactured goods and emulating products and business models from abroad. As a result, poor protection and enforcement of IP rights continue to be significant distress for companies in the EU and around the globe.
A recent report by the European Commission says, “Despite visible progress and attempts to reform, China’s low level of protection for trade secrets and IP theft is still causing irreparable harm to European businesses”.
It is believed that the Chinese government and state-owned companies pressure foreign firms to transfer tech to China in exchange for market accessibility, investment access or regulatory approvals. China also forces foreign firms to license technology below market rates, as a pre-condition to access and operate in its markets.
These practices discourage and pressurize investors and put foreign operators – particularly in high-tech sectors – at risk of losing their competitive edge. So they end up stuck in the trap.
However, China has become increasingly innovative over the past decade and has demonstrated a serious resolve to enforce an effective IPR regime. Indeed, as Chinese firms focus on global expansion abroad and high-tech innovation at home, they have increasingly demanded effective IP protections from the government. In fact, many of the concerns raised by foreign companies operating in China have been addressed by legal reforms and new enforcement mechanisms. So here, a question arises, how can a foreign company or IP firm protect their best interest in the Chinese market?
Best Practices to conquer the Chinese market
Intellectual property is a critical concern for companies operating in China. IPR infringement affects the profitability of foreign enterprises operating in China when sales of products and technologies are undercut by competitors’ lower-cost, illegally produced imitations. Here are some best practices and IP strategies to avoid that scenario.
● Conduct an audit of the firm’s China operations to determine IP assets, IP risks, and assign appropriate levels of protection to those assets based on the risk of infringement.
● Review the company’s internal IP controls to determine whether they provide sufficient protection. Then, make modifications based on the IP audit, and allot resources in alliance with the company’s IP protection objectives.
● Classify IP-relevant information according to its level of sensitivity, and integrate that classification into information control and operational procedures.
● Make IP protection a core responsibility of the entire management, not merely a function of the legal or brand protection teams, and adjust internal information flows and reporting structures to reflect those responsibilities.
● Regularly communicate the value of IP protection—and the appropriate ways to handle IP—to key stakeholders, including government officials, employees, contract manufacturers, business partners, and customers. While the level of IP consciousness among Chinese citizens is growing, regular communication of the importance of IP is critical to install a sense of ownership of company IP among key stakeholders.
● Take clear steps to document company IP protection policies and efforts as such documentation can play an essential part in infringement disputes, particularly in areas like trade secrets.
Companies and IP firms should adopt these proactive tactics in their attempt to protect their IP in China and prevent IP problems before they occur.